June 2026 Client Profile

Meet Sarah Jones, a 55-yearold marketing director in New York. Her employer (a mid-sized tech firm) paid her $165,000 in salary and reported it on her 2025 Form W-2. This exceeds the IRSadjusted threshold of $150,000 for the prior year.

The standard elective deferral limit is $24,500, and as someone over 50, Sarah qualifies for an $8,000 catch-up contribution. Her regular $24,500 deferral can still be pre-tax (reducing 2026 taxable income) or Roth at her choice. However, because her 2025 FICA wages from this employer topped $150,000, any catch-up amount (the extra $8,000) must be designated as Roth (after-tax). She pays income tax on that $8,000 in 2026, but qualified withdrawals (including growth) are tax-free in retirement.

Sarah reviews her plan documents, and luckily, it includes a Roth 401(k) option. She updates her contribution election to allocate the catch-up amount to Roth. Without Roth accounts in the plan, she wouldn't be able to make the catch-up contribution at all.

This change means high earners like Sarah won't get an immediate tax deduction on catch-ups, but it creates taxfree growth for the future.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.